The Truth about “Government Waste,” Privatizing Public Goods, & Turning Citizens into Customers

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For years, I’ve referenced the book The Privatization of Everything as a seminal work in my understanding of the relationship between government and the private sector. So given the recent DOGE of it all, it seemed like a great time to revisit this conversation—now with one of its authors, Donald Cohen. We discuss the role privatization plays in government waste, and who stands to gain from the transformation of public funds into private wealth. (Hint: It’s not the public!) 

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Our show is a production of Morning Brew and is produced by Henah Velez and Katie Gatti Tassin, with our audio engineering and sound design from Nick Torres. Devin Emery is our Chief Content Officer and additional fact checking comes from Scott Wilson.

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Mentioned in the Episode

• Essay: “Breaking: Richest Man on Earth Tries to Rewrite Reality”

• Related Instagram reel on the truth about “government waste”

• Scott Bessent on “economic calamity”

• Karoline Leavitt on the “Green New Scam”

• Joe Mayall on clarifying the “Green New Deal”

• Nearly 1/4 of Americans are “functionally” unemployed (POLITICO)

• The Money with Katie Show episode with Grace Blakeley

• Scott Galloway: “Tech Billionaires Are the New Welfare Queens”

• SpaceX and Tesla received billions in government support

• Stephanie Kelton on Modern Monetary Theory

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Transcript

Donald Cohen:

Their goal is, it’s really about how to capture the cash. It’s really about that. And they’ll be able to do a chunk of it. And as you say, they’ll wrap it in a set of beliefs that’s become “common sense” in America. Government is bad, we’re efficient. That’s a 40 year campaign to turn people away from government. Government’s inefficient, competition is better. The free market’s better. Those sort of resonate with all of us because of what’s been going on, how they’ve been doing that over the last number of decades. So they wrap it in that…when they really just have their hand in the cookie jar.

Katie:

So the impetus for today’s show was a little unusual because usually if I write a really long analysis of a topic, it’s typically like my final word on that subject for the time being. And in the newsletter a couple of weeks ago, I talked about the shortcomings that I was noticing in the coverage and conversations around DOGE’s, shall we say, “unorthodox” “cost-cutting” measures, and what I felt it was missing. So if you would like to read that, we will link it in the show notes for you.

And I noticed a couple things that struck me as just misrepresentative of reality. So first and foremost, this is really what alarmed me, I think Musk was often characterized in this coverage as this maybe misunderstood, relentless renegade; this entrepreneur who was maybe just a little overzealous about rooting out government waste…rather than an ideologue with no legitimate interest in the public good. And the fact that a lot of this coverage was coming from seemingly reasonable purportedly liberal institutions. And it kind of alarmed me because if you’re covering misinformation or you are merely misleading people with the information and you’re not placing that information back into context, you’re ultimately just amplifying misinformation. And the reality that seemed completely unaddressed to me in a lot of the dialogue about what DOGE was doing was the role of privatization in our government.

So welcome back to The Money with Katie Show. I’m Katie Gatti Tassin, and today we are going to talk about how public funds are transformed into private wealth, with the guy who literally wrote the book on it.

So I personally find conversations like these most helpful and necessary when we face a deluge of reporting that does not always connect the dots in a meaningful way. And I should say, I don’t think that that’s necessarily the fault of the reporters, but there is a lot of information coming out every single day, and it can be hard to parse what it all means. So for example, there were a lot of publications that were sharing quotes from the new Treasury Secretary Scott Bassent, and they were saying that he testified, hey, if we fail to extend the Tax Cuts and Jobs Act that’s going to lead to economic calamity:

Secretary Bessent:

This is pass fail. If we do not fix these tax cuts, if we do not renew and extend, then we will be facing an economic calamity. And as always, with financial instability that falls on the middle and working class people.

Katie:

But none of the coverage was bothering to mention that 35% of the funds that are appropriated by this Tax Cuts and Jobs Act are earmarked for the top 3% of earners. So it’s kind of misleading to just say it’s going to be economic calamity or report that somebody in a position of power is saying that without really explaining how this tax cut would shake out or who it would really be benefiting.

Or another recent example, there’s a press conference about Elon Musk and about DOGE and about all this cost cutting concern and Press Secretary Karoline Levitt was asked about which programs were being cut. And she responded:

Press Secretary Leavitt:
“No more funding for illegal DEI programs. It means no more funding for the green new scam that has cost American taxpayers tens of billions of dollars.”

So that quote is being used in the coverage of this press conference, right? But the reporting is often not reminding people that the Green New Deal does not exist. As writer and labor leader Joe Mayall pointed out, “The Green New Deal is a loose collection of policy proposals by representative Alexandria Ocasio Cortez and Senator Ed Markey. Neither House of Congress has passed it, so it has not cost Americans $1, let alone tens of billions. That’s something the New York Times should clarify for its readers.”

So back to how our government actually wastes money and why I felt comfortable drawing my conclusion in my essay and in some of my commentary on this over the last couple of weeks: that Musk’s interests in cost cutting are nothing more than cover for an ideological tirade. Because as far as I could tell from the cuts that DOGE was making and the way that they were being described to the public, they didn’t feign so much as a passing interest in the underlying dynamics of how and why our government spends so much money.

And to me, this kind of comes down to the two things. The first is the privatization of public services, and the second is private sector monopsony power. That is when there are functionally only a handful of large employers that can kind of do whatever they want, such that you effectively have low-wage conditions for tens of millions of Americans who now require public funding support despite the fact that they’re working full time. This is the case for millions of people. The unemployment rate much has been made of how low the unemployment rate is. But what’s really fascinating about the way that we count unemployment is that we kind of ignore anybody who is maybe just making a very low wage or somebody who has maybe given up on looking for a job to begin with. If you include as unemployed people who make poverty wages who make less than $25,000 a year, the percentage is actually 23.7%. In other words, nearly one in four Americans is functionally unemployed in America today if you look at poverty wages and basically say, okay, poverty wages don’t really count as meaningful employment.

And so I look at these two things—at privatization of public services and at private sector monopsony power and the state of low wage work and the amount of low wage full-time workers that are on government benefits—and this is a topic that Grace Blakeley and I discussed at length when I interviewed her, which we’ll also link in the show notes, the thesis being effectively, American capitalism is not really about free markets, it’s about state funded corporate power.

So I see the real story that is playing out in the news right now and all of the coverage about DOGE, the big picture that we’re missing, is that what we have in America is state funded corporate power. And of course the grandest irony of all of this DOGE nonsense is that Elon Musk is, to my mind, the greatest beneficiary of the public funding of private wealth in American history. I really like Scott Galloway’s 2022 analogy of how men like Musk do not understand the role that government plays in their success. He wrote, “We’re on vacation and my kids made $27 from their lemonade stand yesterday. They then spent $29 on Nerds and Airheads candy, and they were a hundred percent confident that they should have unfettered access to their returns before, during, and after dinner, as they earned it. The gap in the math was that Dad spent $38 on supplies—for the lemonade stand, the table, the sign the market, the pitcher cups, lemonade mix, et cetera. Take this times a trillion and you’re starting to get warm regarding the relationship between taxpayers, Sand Hill Road and the innovators they back.”

So he is talking about venture capital. Basically Tesla built its Fremont factory with a $465 million Department of Energy loan in 2010. Its first 200,000 cars benefited from tax credit subsidies of up to $7,500 each. For years, the company was able to report profits solely because of the sale of emissions credits to other car makers, which is another government-provided benefit. It’s somewhere between $2 billion and $5 billion in total government support…

News Clip:

And billionaire businessmen and Austin resident Elon Musk is leading an unprecedented effort to slash government spending, even though his own companies have benefited from government contracts. Over the past several years, over the past decade, Musk’s company SpaceX and Tesla were together awarded at least $18 billion in federal contracts.

Katie:

So for the person who benefited from that much public funding to be now taking a hacksaw to the federal government, it is almost too much to bear. And in the aforementioned essay that I wrote several weeks back, I pointed out that actually the federal workforce is smaller now than it was 40 years ago. It’s the size of the private contract workforce that has grown and hey, any conversation about government spending ultimately has to look at who is benefiting from it the most, because it’s not the families on SNAP, it’s the private sector.

And where did I learn this? Where did I learn that? There are 2.6 times as many contractors as federal workers in Donald Cohen’s book, The Privatization of Everything. And when I shared a video covering some of these high points on Instagram, it ended up gaining a pretty wide audience. Donald Cohen saw it and he reached out to me and he offered to talk. So who better to ask about the current state of affairs and to really understand how public funds are transformed into private wealth than Donald Cohen?

We will get right to that conversation after a quick break.

So The Privatization of Everything, Donald Cohen’s book, co-authored with Allen Mikaelian came out in 2021. Donald is also the founder and executive director of the Research and Policy Center in the Public Interest. The focus of his work is on enriching the public good, metaphorically speaking and inculcating an understanding public goods in the more literal sense, public goods and services are the basics that are in everyone’s best interest for everyone to have. For example, I might not have a child myself, but I recognize it’s in the best interest if children are well educated and therefore I would expect my tax dollars to be used for public education. Education is a public good.

The privatization conversation presents a timely and valuable opportunity to more closely examine how we approach problems. As Cohen wrote, for example, “Too often, our answer to unsafe food is to make consumer choices like shopping at high-end specialty stores, rather than citizen choices like pressing for safe food for all.”

So without further ado, here’s a wide ranging conversation with Donald Cohen where we talk about that we talk about citizen choices and how we think citizens and not consumers.

Okay, Donald, so happy you’re here. This is, at its core, a show about where our personal financial lives meet the reality of the world that we live in. We often talk about how personal finance does not exist in a vacuum. So while I absolutely intend for us to get into all of the ins and outs of privatization today as an undemocratic pilfer of public funds, I want to start by making one very clear point, which is that privatization is part of the reason that we pay more for basic things like education, like healthcare, like childcare than our friends and our peer nations. Can you illuminate for us why that is the case? How does privatization make our lives more expensive?

Donald Cohen:

Well, it could just start to define what does privatization mean a little bit. There’s contracting for public services, right, where they hire a contractor and the contractor does the work and the contractor may or may not charge a fee. Well, in Chicago, they privatize the parking meters for 75 years and rates went way up because the contractor had to make a lot of money. The contractor was global corporations. So the costs goes up when there is a fee.

So for parking meters or for copays and healthcare and all that, the cost goes up because there’s money that’s being taken away from the service for business expenses like executive compensation, debt relief, I mean legitimate business expenses, but nonetheless, that money taken away. But the other part of privatization is the shifting of responsibility from public to private. If the public service is not adequately funded, people naturally want to get and need what it is, whether it’s the healthcare or the education or whatever.

But if it’s not adequately funded, then we’re sort of shifted off to the market. We’re shifted off from public responsibility where we’re in it together to private responsibility. So that can happen in a continuum. It’s not enough money. So we end up paying extra for things, not appropriate equipment, like paying extra for seats in the airplane to get front of the airplane. But then there’s the eliminate the service. There are forces, people and organizations that want to simply eliminate government’s role in fundamental public things. Then we’re shifted to the market. And the market both excludes, the market only sells to people who have money. Businesses have business expenses that aren’t part of delivering the service. Again, legitimate business expenses, but they’re not money—that’s not money going into the service. So I dunno if that’s too abstract or general, but—

Katie:

No, not at all. One thing that I pointed out in the video that I made was I used this example of Maximus, and so I just looked at their 10-K filing and I said, well look, there you go. They’ve got a 20% profit margin. So if they’re taking a 20% cut, that’s equal to a billion dollars a year. Well, that’s a billion dollars of public funds that were supposed to go to the problem of eradicating poverty but instead was returned to shareholders.

Donald Cohen:

That’s exactly right.

Katie:

Your point is well taken. And I think that oftentimes when we talk about public services being underfunded, and this promise, this purported benefit of privatization that advocates will share is, okay, well we don’t have the money in the public funds, or we don’t want to have to raise taxes to pay for this, and so let’s just outsource it to the private market. And a private company will handle this and great, now this is going to cost taxpayers less, but you still get your service, but a private company is going to provide it instead.

Donald Cohen:

That’s right.

Katie:

And that to me opens up a lot of doors for both exploitation but also exclusion, which I think is kind of what you’re angling at here, which is that when you shift the burden to a private company, private companies don’t have any obligation to the public. So you’ve now removed that element here.

But I think what I find so disturbing about this is that oftentimes, to use an example with Medicaid and SNAP, Medicare, Medicare Advantage is another good example of this. You are not actually costing the government less money. That to me seems like the big fallacy upon which a lot of this is built is that it’s purportedly about efficiency. It’s purportedly about getting these costs out of government, but the government is still paying the private companies and the private companies are taking their profits and going on their merry way. So I’m not really seeing this connection of how this is supposed to somehow make this cheaper for the government.

Donald Cohen:

Well, you’ve raised a lot of things there, so let’s break it down. So the first thing is, so a good example is infrastructure, roads, bridges, water systems. So what you hear all the time, there’s massive need. There’s a big infrastructure deficit. We need billions of dollars to fix the roads or build a new water treatment plant or what have you. People who advocate for privatization say, well, the government doesn’t have the money, so we’ll do it because there’s just no public funds and there’s the need. So the truth of the matter though, is borrowing the money is the easy part.

It turns out you have to pay it back. So if they borrow a billion dollars to build a new road, you have to pay it back. And there’s only one place you get that money: us. Taxes, tolls and fees. There’s no other magic money out there. So if they privatize a road, it’s a private company, it’s going to be operated privately. If you look at their 10-K, they’re making a fair amount of money and they’ve got other expenses, our tolls go up and a piece of those tolls go to them. Now, maybe the tolls needed to go up to fix the road to do whatever it needed on the road, but there’s no reason to add 20% profit to that when we actually have limited resources to meet lots of needs. So you’re exactly right. You’re one of the few, maybe the only podcast hosts I’ve talked to that reads 10-Ks. I do all the time. But you also look at the executive compensation, like EBT that you had mentioned, there’s one company used to be Bank of America, others, but now I think one company, Conduent or something like that, has—and I’ll often look up the executive compensation of the—usually they report on the top six or seven execs. So for Conduent in 2023, it was $14 million. They were paid, $14 million to process food stamps, SNAP and other benefits, social benefits. So that’s $14 million that is not going to someone’s food.

Katie:

So let me clarify that for the audience. So EBT is the name of the card that works something like a debit card, and it replaced the physical food stamps in the early 2000s. So it’s associated with the Supplemental Nutrition Assistance Program or SNAP that is supposed to help people afford food who are below a certain income threshold. And so what you’re telling me is that the government contract, the company that has the contract to manage these EBT cards paid their top executives $14 million in 2023.

Donald Cohen:

Right. Here’s what’s interesting. Where do they get that money from?

Katie:

The government.

Donald Cohen:

Not only, not only that—

Katie:

Oh, I know what you’re going to say. You tell me, tell me.

Donald Cohen:

They have a contract to do it, but then they charge the recipients of the cards every time they do a transaction or if they do an overdraft, they charge them more. So not only are they getting the contract, but they’re charging the people who should be using it on food to use the cart. I mean you also raised efficiency if you want me to talk about that…

Katie:

Tee off, tee off, Donald, let’s go.

Donald Cohen:

I mean, it’s one of my favorite subjects. I hear it all the time. Cheaper, better, faster.

Katie:

Especially lately.

Donald Cohen:

Yeah, exactly. And so I hear it because a belief that private business is more efficient than government. So to start, efficiency is a good thing. It’s a good thing. We should all strive to be efficient in all the things we do and blah, blah, blah. But let’s think about what efficiency is. This is a money show. Efficiency is less in for more out. That’s all efficiency is. Okay.

So they privatized Medicaid in Iowa and they said they would save money because the private sector was more efficient. Top executives in that case, I can’t remember the year, it might’ve been 2020 or something, were paid over a hundred million dollars. So that money’s out the door and they say they’re going to save a lot of money. Then there’s returns to investors, they’re publicly traded companies. Then there’s debt service because companies always operate with debt, whether it’s mergers and acquisitions or just cashflow issues.

So that money goes out, they say they’re going to save money. We ask a question, okay, you’re going to spend less on something. Okay, tell us what. And in that case, there’s only one thing, and that’s called healthcare. And that’s exactly what happened. They did it in a variety of ways. They made it harder to more utilization review where they denied more claims, denied more utilization, they made the appeal process much harder. There was even a part of the appeal process where they wouldn’t tell the family appealing what the reason for denial was. They were looking for ways to not spend money.

And I try to look at this objectively because businesses just do one thing. That’s all they do. One thing, they sell things. That’s it. That’s all businesses do. It’s nothing wrong with it. We all buy stuff. But then what do they measure? What do they pay attention to? How many they sell, how much they charge per unit, what it costs to make per unit, what their market share is. That’s kind of it. So what are they playing with? This is objectively, we would do this in our family. So they try to charge as much as possible. Government is a pretty big piggy bank, and they go in and they say, we’ll do it better. Just give us more. And then they’re going to try to reduce costs because they need to figure out how to get the money for that delta, for the business expenses and profits and exec compensation.

Think about prisons. There were a lot of private prisons and there will be more private detention centers going forward. There’s a tiny handful of things you could spend less money on. You can pay corrections officers less, which they do. And that adds to higher turnover, more violent prisons. You can have fewer corrections officers, which they do. There was a juvenile detention facility in Mississippi, had a 70 or 80 to one corrections officer, incredibly violent. They had to shut the thing down.

So you could have fewer workers, you could have lower quality stuff, food, and they do, what does that mean? More junk food, like higher fat content and food, not healthy food. There were scandals, Ohio, they found maggots in the food. The quality control was pretty bad.

They can have fewer nurses come in or come in fewer days a week or doctors. It’s a very concrete and finite list of things you could spend money on. And the question, it’s important as a citizen is to say, is that in our interest to you to spend less money on that thing? It may be maybe they have a good idea, that’s cool, that’s cool. They have a good idea, great. But if it’s just extraction, it’s not in our interest to have more dangerous prisons. It’s not in our interest to have lower wages and fewer healthcare benefits if we want to have a society that, an economy that grows.

Katie:

Yeah, I think it’s really important. I know I sort of mentioned this already, but I have a feeling we’ll keep coming back to this idea, is that when privatization is proposed, it is proposed like this. And obviously the big selling point is that government will spend less. And it feels so important to harp on the fact that we are not spending less. I really appreciate the perspective from a sociologist and ethnographer named Matt Desmond. He wrote Evicted, he wrote Poverty by America. And one of his more popular pieces in the New York Times was about this fact that we have steadily increased our spending on poverty reduction at the federal level. Over time, we’re not spending less, and yet the poverty rate is not budging. And I think that the privatization conversation to me feels like it begins to answer that question about why these problems feel so intractable. Is it because poverty is impossible to eradicate? No, it’s because just a lot of this money is pooling in the wrong places.

Donald Cohen:

There’s austerity, sort of the flip side of the coin to privatization. You’re just not spending enough and are you—I’m not an expert on poverty alleviation, but think about it. Are they spending the money in the right place? If we gave everybody free dental care, it would change people’s lives. People don’t get jobs because they have bad teeth. If they spend money on healthcare, if they spent money and gave everybody broadband access. You can’t function today in America or anywhere in the globe without access to broadband, whether it’s get a job or fill out your taxes or what have you. So that’s part of what’s going on is that we’re not spending it in the right place.

And then what’s part of it’s going on is there’s a poverty industry like EBT cards, like Medicaid. We’re not spending enough of it, but we’re taking some off the top and all of that. So it’s absolutely true. Now, you accurately say, I mean, because I hear it all the time. They come in and they say, we’re going to do it cheaper. We’re going to do it better, all that.

Okay, first up, it often doesn’t happen that way. If it does happen, it’s because they’ve cut something to the bone that causes a problem down the line. They reduce the wages of corrections officers, the prison, et cetera. But in addition, what often happens is a low bid, right? This is contracting. We all contract because it’s good to put this in a way that people can relate to. Everybody contracts for things. Often governments have to go for the lowest responsible bidder. They have to go cheap. So what happens is the contractors who only do one thing, the businesses, they want to get a contract so they can do the work. They low bid, they bid low, and then whoops. Turns out they didn’t bid enough. So they come back and they say, we really can’t do the work. I mean, this happened in Iowa and Medicaid. They really can’t do the work. We were wrong. We were wrong. Give us another a hundred million dollars.

And then it’s like, let’s say you were contracted to paint your house and they get halfway through the house, and oops, we underestimated. Do you want us to stop or do you want to give us more money?

Katie:

You have to just pay more.

Donald Cohen:

Exactly.

Katie:

Wow.

Donald Cohen:

And it happens. It happens all the time. There’s cost overruns all the time. Where’s the money? Follow the money. There’s trillions of dollars spent every year by governments in America. You’re a business, you follow the money. It’s logical, right? You go where the market is. So you have companies competing with one another because competition, they say competition is the force that will make all this good competing. And that leads to low bids, and that leads to cutting corners, and that leads to poor service. And that down the line leads to people not trusting the government to do the thing. And then they get frustrated and, oh, just give it to the private sector. There’s sort of this vicious cycle of let’s blow it up. Maybe they’ll do better and they don’t.

Katie:

We will continue this conversation after a quick break.

So one of my favorite pastimes on this show is shaking my fist at the sky and going, Reagan, whenever anything goes wrong. But it is my understanding that Ronald Reagan actually failed at privatizing large swaths of the federal government. And so I figured, hey, it might be kind of fun to do a little bit of a history lesson here, and let’s talk about where this story really begins.

Donald Cohen:

So it’s a really good and really interesting question. It comes from a few different places. So start at the New Deal, a big increase. Social security, a big increase in government engagement in the economy.

Katie:

So we’re talking 1940s,

Donald Cohen:

1930s, New Deal, 1940s, right? 1940s after the World War II, the GI Bill, massive in public investment in creating a huge middle class. So during that period, so this was like Keynesian economics, government involvement. Now, there were people, the Austrian—they were Austrian from some guy named Hayek and Meeses, and these people that are, who didn’t believe in that, didn’t believe in the involvement of the state to do good things. They believed in free markets and individualism. So they’re out there, they’re just in the woods. People supported government action.

So then in the fifties, Brown versus Board of Education, which eliminated segregation in the schools, had a huge impact because what happened is southern schools now had to desegregate, put Black kids together with white kids. The racist response to segregation was to create what are called segregation academies. They left the schools, they shut down public schools, and they started school vouchers, and they let people take their money to go to a private school. So here’s what it is. You’re separating us from the us. So remember, what’s really going on here at a meta level is they’re turning us from citizens with responsibilities to each other into consumers, where you get what you pay for and where we can go where we want. If we don’t want to be with Black kids, we can be with Black kids. What consumers do, consumers can do it can choose whatever they want. They actually called them freedom to choose plans.

Katie:

Milton Friedman was like, yes, yes.

Donald Cohen:

Exactly. Well, he came up with the idea of school vouchers.

Katie:

So much freedom. That’s

Donald Cohen:

Exactly right. So that’s sort of a stream—People reject trying to leave the commons. People use those language, leave the us.

Katie:

So once public goods were available to Black Americans, white Americans we’re like, well, we want different goods now.

Donald Cohen:

That’s right, right? That’s right. We want different goods. So that means just give us the money and we’ll do our own thing.

Then you’d go fast forward a little bit. And then before Reagan, there was real concern after Nixon that passed, that created the EPA, that created OSHA, the National Highway Safety Board, the first Clean Air Act that did all this kind of good stuff because of the different politics of the nation, putting the Vietnam War side. And the business community got pretty freaked out. They thought this America was going to become socialist because of Ralph Nader, maybe listeners—and Rachel Carson who wrote Silent Spring about the dangers of pesticides.

And they started to organize. The business committee started. Before that, they weren’t very involved in politics. Now they got involved in politics. They created the think tanks, the Heritage Foundation, the Cato, and all of these to sort of do the idea and message work. They actually started organizing. They organized, I’m not going to remember the name, like a coalition, an association of businesses that want to advocate and look for contracting for actually to do that. And this is kind of because Reagan failed. We better get our stuff together. So they organize themselves. So they’re getting more and more involved.

Can you remember Reagan’s thing—and sorry to try to be complicated, multiple dimensions here. Reagan was the spokesperson for privatization, but as you mentioned, he failed to do it. Famous words. What’s the 10 most dangerous words in the English language?

Katie:

“I’m from the government, and I’m here to help.”

Donald Cohen:

That’s exactly right. So he was attacking government. Bill Clinton comes in and says, the era of big government is over. Bill Clinton was the privatizer. He implemented the right-wing agenda to privatize. And there are conservatives who say that he was the privatizer. Welfare reform, I think it was TANF in ‘96 maybe, was the first major social public service that was part of the bill that they made possible for states to privatize. And they did it.

Katie:

And this is the Temporary Assistance for Needy Families.

Donald Cohen:

Correct.

Katie:

I know that this is still how it works. They send the money to the states and then the states have quite a bit of latitude about how they spend it. So you might have some states that are spending it on those crisis pregnancy centers that they put next to abortion clinics. And then when women walk in and think they’re out of Planned Parenthood, they’re actually going to be—

Donald Cohen:

That’s right.

Katie:

Yeah. So this is money that should be going to, it’s literally called Temporary Assistance for Needy Families. And yet these states have a lot of, okay, okay.

Donald Cohen:

I mean, there are lots of programs. Educational out of, federal money goes to the states, in the states administered in education, and transportation money. It’s a normal thing. But yes, they give it to the states and they do what they do.

The other thing I want to mention about what Clinton did, because I think it was really important. At the beginning of his administration, he appointed the Vice President Gore to do what was called the national performance, or they colloquially, they called it the Gore Commission to improve government, make it better. There’s nothing wrong with that. It’s an enormously complex institution. We should always be making it better. And privatization was baked into the strategy. There’s a couple of books that came out, but also they changed the language from it. Literally. They started talking about us as consumers and customers of public service, which feels semantic, but it’s not. It’s a fundamental shift. We are not citizens, we are consumers. We consume things. But as a citizen, we have other responsibilities.

I feel like I want to give you my definition of privatization and public goods. So when I say privatization, my definition is private control over public goods. And it expressed in a variety of ways the important part of the conversation. Then I go to what’s a public good. Now, there’s a textbook definition I don’t use. This is a democratic conception of public good. I’m not the only one. And I have a three part definition of what’s a public good or public thing.

One is there are things that we all need to survive and thrive, clean air, education, health, mobility, clean water, broadband. We all need it to get through life in a good way. And there’s more. And we can decide; broadband wasn’t true 30 years ago. It’s true now. That’s why it’s a democratic decision.

But the second part of the definition is it’s the things we need everyone to have, whether we need them or not. Even if you don’t have kids, we need every child to be educated. Well, it’s in our social interests, in our economic interests, it’s in our values. During Covid it was pretty clear, the health of all of us depended on the health of each of us. We need everyone to have these things, not just as a value as a society.

And then the third part of the definition is, if we decide all is all that everyone should have healthcare regardless of their ability to pay, et cetera, then we have to do it together—we have to, through the instruments of government. Now, I’ll say that doesn’t mean private sector can’t be involved. You can contract to do something, all that.

But the question is who’s in control? And that’s got to be us to be in control and decide. If we need some private, I mean, private companies build the road. That’s just, we contract for that. It’s okay. It’s a question of where the road is, who decides how much it costs, and how are they doing good rigorous evaluation of the contractors, all that stuff.

Katie:

Lemme see if I can extrapolate that example a little bit. It’s the difference between we’re contracting with a private company to build a road for the public and they’re being paid for this service as opposed to we are selling this road to this private company that’s now going to control it and you’re now going to pay the toll to them.

Donald Cohen:

Yep.

Katie:

Okay.

Donald Cohen:

And then, so let me give you another example on that one. And this is in Texas. The years all blur for me. So there’s a road, State Road 130 between Austin and San Antonio. I think.

It’s a privatized road. So privatized road and a truck route. It’s a truck route. I mean cars going up, but it’s also a truck route.

So it turned out they weren’t making any money. People didn’t want to pay the tolls. They figured out another way to get from between those two cities. So the first step that the private company had the authority to do was raise the speed limit to 85 miles an hour. This is a truck route, okay? So just saying.

But then some investigative journalists tried to get the traffic projections used to determine whether the road was needed and they couldn’t get ’em because they said they were trade secrets because it was private.

Katie:

How convenient.

Donald Cohen:

So again, that’s the issue of control. Whether we build a road or not depends on the volume and what we can expect. And the public may get it right, may get it wrong, that’s not the point. But that information should not be private. Then we could say, you got it wrong. What should we do to that doesn’t keep us whole, keep the private sector whole and keep them in control of our things, our public things.

Katie:

So in your reporting, a lot of the prominent examples in your book are often like this one. There are instances in specific states, and I actually did live in Texas for a while, but someone that doesn’t live in Texas probably has no idea this is happening. A lot of these impacts are going to be felt very locally, very regionally in this road. For example, if there are a bunch of people that used to use this road to get between San Antonio and Austin, and now there is a toll and they don’t want to pay it, well now they’re probably taking side roads and they’re going to be putting extra pressure and extra congestion in these other parts of town that maybe your house is in this area. And so these things have very specific trickle down effect—the real trickle down in economics is happening here.

But I was wondering if you could kind of help elucidate for us the dynamic between the states and the federal government here. Is it always that we’re talking about states using federal funds often for these public-private partnerships, and that’s how the federal government gets wrapped into this? Or to what extent is the federal government itself engaged in this type of privatization as well?

Donald Cohen:

That’s a good question. So the big stuff, the federal government’s a bank; transportation, they don’t build roads. I mean Army Corps of Engineers, perhaps something like that, but they don’t build roads. Now, a road could be built in San Diego that doesn’t have any federal money. It has state money or they do a bond measure, a local bond, whatever.

But in the case of transportation, the federal government’s a bank. We’ll come back to this later when we talk about the current administration, there are things that the federal government does that they can stop doing. I mean, a couple of little examples: the National Weather Service and the post office. The National Weather Service, all of the data that we look at, the weather on our phones or on TV is public. The satellite system and all the sensors are public now. They give it away to private apps, then AccuWeather and others to do certain things with it, but it’s all ours. They want to privatize the whole thing. But what the private sector has been able to do, and this may have changed the last couple of years in the Biden administration, I just don’t know, but they have prevented the federal government from creating an app that we can use directly from the government. We have to use one of the private apps. They’ve used that with their lobbying power.

Katie:

It reminds me a little bit of basically how our taxes work.

Donald Cohen:

Well, that’s the second one. And that one was a big change happened in the last couple of years.

Katie:

Yes.

Donald Cohen:

So Intuit, QuickBooks, and TurboTax and all those lobbied for years to prevent the federal government from allowing us to pay, from having the federal government create a website where we can just pay our taxes, which would work for millions of people, and they could pre-fill out with our W-2. It would be that simple.

Katie:

You have the information, guys, you have it all. Tell me what I owe.

Donald Cohen:

But they made it impossible because why they wanted to make money and us to spend a hundred bucks on TurboTax. But then what happened during the Biden administration was direct file. There’s now direct file in the country for, not everybody under certain conditions, but it’s an expanding program, and it cuts out the private sector. Lots of people who don’t have to spend the $100 on TurboTax or a tax preparer, they can just go online, which just kind of makes sense.

Katie:

Yeah. So I guess the big example that comes to mind for me federally, I took a screenshot of this morning, I saw this headline. I woke up and I was like, ah, I’m going to talk to Donald Cohen today. I checked my phone, Wall Street Journal, “DOJ investigates Medicare billing practices at UnitedHealth: Civil probe of diagnoses that triggered extra payments to the company’s Medicare Advantage plans, adds to the scrutiny of the healthcare giant.” And I was like, there we go, perfect, perfect headline for the morning that we’re going to talk about this.

But yeah, it’s this Medicare Advantage. It’s these programs where you think you have government health insurance, but you actually don’t—because technically United Healthcare is your insurer. And so it’s funny because there’s this, to me, there’s this dual issue happening here where I’ve already asked you plenty of questions about, let’s talk about this idea of this myth that this is actually cheaper for government.

There are so many examples we can point to be like, actually the government is spending more on these things than they would if they were just providing them directly or engaging in a less convoluted manner of providing public goods and services. But there’s also this piece of it that I think is so well illustrated by the TurboTax of it all, which is that a lot of these companies that have these government contracts, it is not in their best interest to solve the problem that the government is paying them to solve. If we actually could pay our taxes directly, there would be no need for these tax filing softwares that we are told we need.

If you, for example, with the welfare agent, if a Maximus actually solved the problem, they wouldn’t make money who were in poverty. They wouldn’t have customers anymore. So it’s like there’s also this disincentive baked into the very structure where you’re paying somebody to provide a service and to solve a problem that if they actually solve it, they go out of business.

Donald Cohen:

So you read 10-Ks, the best part of the 10-Ks are the section called risk factors.

Katie:

Love.

Donald Cohen:

For listeners, and you could probably describe it better, is this is private companies traded on the stock market that are telling their investors what could harm their bottom line objective. They’re objective truths, right? These things could make us make less money. I’ll get to the detail, but it’s really important to understand the difference between interests, public interest and private interests.

Private interests are legitimate. They just not maybe in our interest. Okay? So if you look at in these 10-Ks, the 10-Ks are the annual filings to the Securities Exchange Commission. Prisons are just the best example. If you look at their risk factors, they say, what’s a risk to them? Lower crime sentencing reform that can reduce that legalization of marijuana.

Katie:

Oh my God.

Donald Cohen:

So think about it objectively. Those are risks to them. Those could hurt their bottom line.

Water companies, conservation. They sell water. I look at ’em, all their interests, like I said at the earlier, they do one thing, they sell stuff and they want to sell more. It is not in their interest to not sell stuff. And so these perverse incentives are baked into all these contracts.

So there’s incinerator—maybe you got this part of the book, the incinerators that have these “put or pay” clauses in their contracts, and essentially for recycling for, either the incinerator will contract with the county or the local municipality, but in the contract, the city say has to commit to creating an adequate amount of trash for the incinerator. And if they don’t do that, they have to pay anyway. So there’s a quote in the book, and it’s been a while, but a city that stopped doing recycling, they had to fill their required quota.

And I get it. Private prisons have bed guarantees: 80%, 90%, 100% fill the beds or pay us anyway. And here’s interesting about, so, okay, yeah, they have fixed costs. Okay, legit. But Arizona, they had a hundred percent in their contracts, state contracts, bad guarantees. I think they did legalize marijuana in Arizona. There would reduce crime. They would reduce because of changes in drug sentencing. Perhaps there was changes in marijuana. There were fewer people being put in prison in Arizona. They had to pay the prisons anyway.

Now, but think about that. There’s money going to a prison with empty beds that could be going to drug treatment to education, to things that could help people get out of prison and stay out of prison and get a good life.

These Chicago paid meters, there are revenue guarantees in lots of these contracts.

Katie:

I want to talk about the ways in which there’s a Jon Stewart episode that comes to mind. For me. It’s about our taxes. And basically what Jon Stewart says is what happens in the United States is that our government uses our tax dollars to pay these corporations to produce our goods and services for us. And then the corporations turn around and they sell us the things that we’ve already paid for effectively.

And so I want to be as abundantly fair as possible regarding this idea that the public is paying for things twice. And as I was thinking about this conversation, I was thinking about an email correspondence that I had with the listener who basically said she works for the National Institutes of Health-funded labs, so NIH-funded labs. She’s a molecular biologist, and she says she has also worked in the private pharmaceutical industry. And she was like, look, taxpayers spend at least $50 billion a year on the kind of biomedical science that is going to lead to medical therapies later. This money for these original kind of breakthroughs are coming from the federal government. And she estimated, she’s like, yeah. And at the same time, the private biomedical R&D funding that can reach $100 billion a year. These groups are working on different timelines. The NIH is funding things that might be valuable 20 years from now. And these private companies are trying to bring products to market as quickly as possible.”

And so when you hear things like that, is this an area where you would say, yeah, there are instances where the public sector and private sector do work together, or they can be complementary. They’re fulfilling different functions. Because I think when I hear it, I see the point that this person is making, and yet at the same time, I think, right? But if a private company is ultimately the one that is going to benefit the most from the breakthrough, I think about the example of the GLP-1s. I think it was public funding that helped fund this Gila monster breakthrough that ended up being what got used in Wegovy, Ozempic, what have you. And the public is not profiting off of that invention. Novo Nordisk and Eli Lilly are profiting off of that invention.

So there is this inherent disconnect where these companies and the government may be working on a complementary fashion, and it’s totally on the up and up. But at the end of the day, if the government is supplying the money and the resources that is leading to these breakthroughs, but the public is not benefiting from the upside of those breakthroughs, that still feels like a gap to me.

Donald Cohen:

Absolutely. Let me go back to the definition. Private control over public goods. What’s the opposite? Public control over public goods. Health is a public good. We want to be healthy. So there’s two kinds of research. There’s direct research that’s going right into a drug, and then there’s basic research that you’ve referred to. Massive amounts of public dollars are going into the development of drugs in both of those categories.

So let me give you an example of Covid. We all had that experience together. I find this so fascinating. The reason that they were able to sequence the DNA or the RNA so quickly was because of the Human Genome Project in the nineties that was fully publicly funded, and that created the demand for sequencing technology that probably private sector helped create. So we had this massive investment of money into the human genome project. It created sequencing technology that enabled us to sequence the RNA and DNA, so to begin to create those vaccines pretty quickly. And originally it was Moderna and Pfizer and one other.

Katie:

Johnson and Johnson?

Donald Cohen:

Maybe. Yeah, I think that’s right. And so Moderna got a government grant. Pfizer didn’t get a grant, but they had a buy guarantee.

Katie:

Okay, the government saying they will guarantee they will purchase it.

Donald Cohen:

So most of this money to do those drugs was government money. Now you get to the initial—Control: we let them have the patent.

Katie:

They own these pharmaceutical companies.

Donald Cohen:

They own the patent.

Katie:

Okay, wow.

Donald Cohen:

When they were trying to sell it, then they could take those drugs and sell them in other parts of the world. This was our investment, but we gave ownership of that to a private interest that was different from ours.

So really significant. That happens a lot to the issue of whether there’s public and private. Absolutely. There’s public and private all the time. Every road’s a public private partnership. It’s everywhere. Again, who’s in charge? And it gets to a little bit different point of contracting is really hard. Writing a contract, figuring out what you need, anticipating anything that could happen in the future, it’s actually really hard and much more bureaucratic.

So think about it this way. Let’s say you’re a city and a contractor. Your janitors. Your custodians. The distance between the person who wants the work and who’s doing the work is now longer because you put in a contractor in between and then you put in contract oversight in between monitors in between. So it’s more bureaucratic and less control. It’s easier to manage someone if they’re closer to you and have control over that. It’s an important point. Plus it’s really hard to anticipate the future. Who the hell would’ve realized thought we were going to be in a pandemic for three years?

Katie:

Yeah, don’t need the janitors in the commercial buildings anymore.

Donald Cohen:

Well, but even in general and just in contracting contracts are very rigid legal documents. The world’s not a rigid legal place. The world is a fundamentally changing place, and we need our institution to have the flexibility to respond, and contracts tie our hands.

Katie:

That’s a really good point. Again, I try to approach these topics from as good faith of a position as I can. And I think something that’s always interesting is it’s so easy to point to bad examples. And you also have pointed out that during the big push for privatization, that was when you saw the origins of think tanks like Cato Institute, like Heritage Foundation who are working overtime to make sure that there are a lot of articles out there about all these successful privatization measures, and they’re on the other end of the discourse.

And so sometimes I find it to be a little bit challenging to have this discussion using examples alone because I think it can make it easy for somebody to a point to a time where, hey, maybe it did work, or, okay, well hey, maybe this is the issue and if we can solve this issue, then now we’ll get all the benefits of privatization and it’ll work and it’ll be great.

And that’s why I think it’s just critically important to have conversations like these and analyze them from the bottom line of a philosophical perspective, which is what really what you’re saying, it’s like is this a democratic use of public funds? At the end of the day, it’s really not about efficiency. It’s about whether or not we agree that our public goods and services should be owned and controlled by the public that pays for them and benefits them, or whether they should be used to privately rich people like Elon Musk.

Donald Cohen:

And even whether they’re contracted or not. I mean, governments contract for things. Everybody contracts for things, but are we doing it right? Are we ensuring efficiency and effectiveness by watching? So sort of crucially important to understand that we need to, it’s our government, it’s our stuff. We need to be clear at the philosophical level, which I think you’re right. What’s our stuff? What’s public? What’s a public thing? There’s stuff we got to do together, like I mentioned earlier, and that’s the first question, what should be a public thing?

And then the second is, who pays? There’s only one or how we distribute the payment, who gets it should be universal that everybody should get because everybody needs, whether you need it today or not. We should look at how the market works, the market dynamics competition. I was interviewed once in the book by a conservative and he said, well, what about the profit motive? I said, yeah, profit motive may do good things, but it also created the opioid crisis.

Katie:

You have more patience than I do. I just feel like I have so little patience. Now, we have so much proof that the profit motive is not like a benign and benevolent force. It’s not something that you can overlay over something. A market is just simply not the best way to provide something that everybody needs.

Donald Cohen:

Well, here, what I often say is they say, well, they put it in the market. I think market things are different than public things. People talk about market failure. I don’t embrace that term; in these days when I say it’s market inappropriate. It’s like cooking your eggs with a hammer. It’s just the wrong tool.

Because markets exclude. Markets extract. If you don’t do a good job, markets do different things. They’re legitimate institutions, but just kind of the wrong thing. Now, there are things that are put in the market. There are things that are given to the private sector to do on our behalf, and there they say, well, the market dynamic of competition will help. Competition is a race to the bottom. It’s also competition’s a good thing. We all watch sports. We want our kids to compete for the nothing wrong with competition, but competition creates these distortions. Also, it’s not a universally good thing.

Katie:

To me, the challenge of the success of a lot of this rhetoric is that it has really transformed. I think you see the language of a Milton Friedman or a Friedrich Hayek in the American ethos. It’s really transformed the way people think about themselves as consumers first and citizens or civilians second. And it’s where, I’m not sure, chicken or egg, I tend to think that the individualism is downstream of that.

But there is an economist, I really appreciate her name’s Katherine Edwards, and she gave a great example that I think fits here nicely, which is basically she has conversations with people all the time about, just because something is good for you does not make it good economic policy. And just because something is not directly benefiting you does not make it bad economic policy.

So she was talking about the mortgage interest deduction. She’s like, man, no one gets angrier than a homeowner when I talk about the mortgage interest deduction and the fact that this isn’t really good economic policy; this is really just helping people who can already afford homes get bigger mortgages. It’s not really solving the problem of housing, but so many people feel directly benefited by it that they can’t fathom that maybe it’s not good economic policy.

The flip side of this is school lunches. Is it in everybody’s best interest that children are fed at school? Absolutely. But if you’re sending your kid to school with lunch and you’re like, well, why should I have to pay for somebody else’s kid? That is the longest standing and most insidious outcome of this very individualist, very myopic and narrowly focused interpretation of what’s good policy and what’s bad policy.

She made this other example of like, yeah, there is a bridge in Minnesota that my tax dollars helped fund, and I’m never going to drive over that bridge, but it benefits me if goods can flow through the middle of our country easily. That’s the difference. And I think that this to me is the challenge rhetorically, is to get people into that mindset of being citizens or civilians first, not consumers.

Donald Cohen:

No, I completely agree. I said it earlier and you just said it better. It is in our interest to have that bridge there for goods, for services, for people to go to work, for people to travel. It’s in our interest for every kid to be educated, to have good healthy food. Our interest, and you can come up with specifics if kids get a good education. Maybe there won’t be more crime or drug abuse or all that, but it’s also just common sense, an educated nation, a healthy nation. Think about it. Kind of a wild concept, huh? An innovative smart nation, A nation that understands that we got to save the planet. We’re in it together, and we are interdependent and dependent on each other, whether we realize it or not. It is a fact that we are interdependent. We just have to realize that and act on it.

Katie:

Yeah. Well, we kind of alluded to the current administration with Trump in charge. I think there is a far more explicit desire to privatize public services at the federal level. There was an article I saw the other day, Hegseth indicating interest in privatizing the VA, and so I realize I am asking a biased party because you and I share a lot of these same sentiments, but what do you make of this assessment that privatization is the elephant in the room here when it comes to all this talk about government waste and cost cutting and what have you? I mean, to me, it kind of seems like the obvious thing that we’re not addressing, that’s you’re not really talking about the real problem, and you’ve got these scapegoats in the DEI policies and the whatever, you have all these scapegoats, but to me, I’m like the source of the waste or the source of the quote inefficiency is pretty obvious to me. And so I’m just curious what you make of what’s going on right now in the federal government?

Donald Cohen:

I mean, listen, there’s waste in every organization and institution, not waste or inefficiencies in everything, and you work to conclude that, but there’s no massive waste that we’re going to squeeze out, and all of a sudden it just isn’t true. Any organization and government is complicated. So in terms of what the Trump-Musk administration is doing, several things. There’s an economic component, there is a political component. They want to dismantle government, number one, and part of dismantling would be give it to the private sector. I mean, people have been trying to privatize the VA for a long time and it’s going along. It’s not new.

Katie:

Oh, I didn’t realize that.

Donald Cohen:

Yeah, no, this is all—it’s been in the works. Privatize the big stuff. No question about that. But also, if you remove services, which there’s going to be massive cuts, then like I said earlier, you’ll be on your own to get ’em.

Then what will happen, the program is a bank. The money dries up the city or the county is now responsible for something, but doesn’t have the money to do it. What do they do? And they’re desperate. They don’t have the capacity. They don’t have the staff…and the contractor community is all over it because they’re in sales.

It happens in every government. The tendency to want to outsource something is going to be very real and very present, and not just from conservatives, because running a city or running a county or running a state is a hard thing. Take this off my back because then turns out we need to do the stuff for people.

So the other thing that’s going to happen, there’s a pot of gold and they want their hands on it, so they’ll get every contract possible. It’s already starting to happen. So source contracts and all of that. So dismantle, capture the revenues, capture the sales. Lots of that’s going to happen. This is a private sector guy.

Katie:

We’re referring to both Trump and Musk here.

Donald Cohen:

Both. And eliminate your political opponents. So why do they want to privatize schools? They don’t like the teacher’s union. I mean, there are other reasons, but they’d love to get rid of the teacher’s union. They’re political opponents. So that there’s a political component to what they’re doing that’s very real.

The other piece is Trump is he cut off all the money. He had to back up, backtrack all the money to cities and states. Then he backtracked because it turned out it wasn’t legal and didn’t make sense. But what he wants to do is get everybody coming back on their knees, begging him so that he can extract what he wants from them. It’s a power play so that he can help his friends enrich himself, accomplish whatever he wants to accomplish.

Katie:

To me, I mean, it’s two things. A, it’s interesting to speak. So disparagingly of the government as though it is this thing external to you. When you control all three branches, the government is you. What do you mean you want to dismantle? You’re the government. It’s the problem with populism. It’s like once you actually take charge, you’re like the dog who caught the car and well…

Donald Cohen:

That’s right.

Katie:

Now you are the institutional power. I hate to break it to you. You’re the man that you purport to be against.

But the second piece of this is the Elon Musk piece, which I think is completely inescapable. He’s worth hundreds of billions of dollars, and his companies are almost exclusively funded by government money. So it’s absolutely outrageous to see a person like that have the gall to complain about government waste or to purport to care about eliminating. It’s like my dude, you are the government waste brother. The call is coming from inside the house.

At this point, he was tweeting about SpaceX will make air travel safe again. And I was like, oh. So that’s what this is about. You want to privatize the FAA and sell your company the contract? Cool. Okay. It’s all coming together.

These kind of red flags that we’ve laid out about all the reasons why we should be cautious about privatization. How often is this going to come up? It’s like a, it’s make the government smaller. It’s going to be the theme of this administration.

Donald Cohen:

All the time. And one thing I always say is there’s no such thing as the government doing something. The government doesn’t have agency; people do. Trump is doing things. Musk is doing things. Hegspeth is doing things.

Katie:

The 19 year olds that they’ve set loose in the treasury department are doing things.

Donald Cohen:

That’s right. They’re the ones doing the things, and their goal is it’s really about how to capture the cash. It’s really about that. And they’ll be able to do a chunk of it, and as you say, they’ll wrap it in a set of beliefs or common sense; that’s become “common sense” in America. Government is bad, it’s inefficient. That’s a 40 year campaign to turn people away from government. Government’s inefficient, competition is better, the free market’s better. And those sort of resonate with all of us because what’s been going on? How they’ve been doing that over the last number of decades. So they wrap it in that when they’re really just have their hand in the cookie jar.

Katie:

Well, it’s funny that you mentioned that “common sense” has become such a right wing coded ideas. Oh, it’s just “common sense.” Anytime you hear common sense, replace it in your head with “conventional wisdom.” Just because something is conventional wisdom does not mean that it is true. It means that you’ve internalized it now to the extent that it feels like a belief, but to your point, this is a 40 year campaign to damage trust in government to get your own hand in the cookie jar. So every time I hear the “common sense,” I’m like, oh, there it is again. Yep. Okay. So it falls in line with this thing that we’ve all been told since the 1970s or the 1980s, and so it feels true. I guess I haven’t led us to a place where we can now end on some happy high note…

Donald Cohen:

But I can. I can.

Katie:

Yeah, like you tell me here, what do we do about it, Donald?

Donald Cohen:

Well, so here’s the thing. What’s interesting now, most people don’t know what government does.

I mean, maybe at the city level, we don’t mix up the trash and that, but we really don’t know. But I described government services as both ubiquitous and invisible at the same time.

I live in Los Angeles, the air is cleaner. That didn’t happen by accident. It happened with policy action, with rules and regulations and laws. The paint on the wall behind you used to have lead in it. It doesn’t anymore. So it literally, you could look everywhere and there’s public things everywhere around you.

Now, what’s happening now, I think there’s a little bit of a teachable moment because they’re going after agencies that most people don’t pay [attention], and this is not their fault. It’s like it’s hard to keep track of if it’s a big institution, not the population’s fault, all of a sudden we’re paying attention to things we didn’t actually know about because it’s going to affect us.

USAID, they’re going to cut USAID, but then we’re going to start looking at, okay, well, what’s the impact on us? What’s the impact when you cut—there’s a tax on disabilities and disability programs in schools right now. There’s a tax at all levels of the dismantling that actually are going to hurt real people, that are going to make clear to us, oh, that’s the government, and therefore, okay, it’s not the government, it’s the institution. We have to deliver these things, and we want these things.

Katie:

It feels like where we’re arriving now is that it’s been easy, perhaps for the last 40 years, for this type of rhetoric, these types of comments about the government being inefficient or the private sector being better. It’s been easy for those things to take hold and feel true enough because we actually didn’t really have a good understanding of the role that government was playing in our lives because it was more or less working, maybe not working as well as it could have been, but it was there. And so now that these things are going to be stripped away in earnest, we will start to feel the pain and achieve a better understanding.

Donald Cohen:

I think that’s really important. There really is negative public attitudes about government, and that’s all mushed up with hating politicians, and lack of awareness, with immigration. And one of the things that they’ve accomplished over the years government ideologically or “common sense” wise, is government’s for somebody else, right? That’s what welfare queens was about. It’s government for somebody else.

Katie:

Well, you don’t think of your mortgage interest deduction. You don’t think of your 529 tax deduction. You don’t think of your 401(k) tax deduction. All the government bennies that I’m taking home, those aren’t benefits. I’m entitled to those, cause it’s my money. Right?

Donald Cohen:

Exactly So we need to have those conversations, and I always bring it back. There was 40 year attack on government. We have to rebuild trust and government, I think, and the government has to be worthy of the trust. But I think the more important part is we have to rebuild trust and commitment to the public and the idea of public that there are things we got to do together. That’s the start.

Katie:

And that there are things that we have to do together. There are things that are worth doing too. I mean, it really does. You’re right. It starts at the local level with your local community. I was talking to somebody the other day, you and I met really, because I had a viral video on Instagram. But really 3 million people saw that there are a couple hundred people down at City Council that have more sway over what happens in this region of the country than all the power in the world, based on virality on a video. So I appreciate that. Thank you for finding a way to conclude us on an uplifting note. I lately have, to be honest, I have not felt very uplifted. I have felt—

Donald Cohen:

It’s pretty hard.

Katie:

Pretty pessimistic, so I appreciate it.

Donald Cohen:

Well, I’m in Canada for the week.

Katie:

Well, thank you for being here, Donald. I appreciate your time and your expertise.

Donald Cohen:

Okay, really a pleasure. Let’s do it again someday.

Katie:

So some final thoughts. I will keep this quick. I have been thinking a lot actually recently about Stephanie Kelton. It’s kind of random. Stephanie Kelton did some work on Modern Monetary Theory or MMT. She was an advisor to Bernie Sanders in 2016, and she focuses on Modern Monetary Theory, this abstract economic school of thought that I personally find sort of hard to grasp as someone more familiar with the paradigm of a household budget.

But it basically says that governments don’t actually need to rely on taxes or borrowing to spend money because governments create their own. And that in that sense, the purpose of taxation is really just to remove money from circulation, to remove it from the money supply, and to create a demand for the currency, not to actually pay for anything. So she’ll often say, “Hey, when we say who’s going to pay for this, or how are we going to come up with the money for this?” Stephanie would say, you don’t really need to actually come up with the money. It’s not really about who’s going to pay. It’s about the productive capacity to provide these services.

It’s less about needing to increase taxes or getting the government more money. It’s about finding the political will to create these jobs. So if you’re talking about the healthcare sector, for example, it’s not that we don’t have the money for universal healthcare. It’s that we don’t have enough doctors. It’s kind of a different problem. It’s not really about raising taxes to get the money to pay for the no. It’s how do we get more doctors? How do we build more hospitals?

And like I said, it’s a very complex idea and it is theory. It is a theory. It’s not something that’s necessarily easy to prove or grasp even, but it does ask us to think about these questions in a different way. It asks us to think about them as issues of political will, and of productive capacity…rather than a simple who’s going to write the check for this?

Stephanie Kelton:

Covid broke everything. Here in the US and around the world, governments did some extraordinary things: They sent money to people directly to help them buy food and pay rent. They provided free Covid testing and expanded healthcare to cover more of the population. They gave money to businesses to help keep them afloat. While much of the economy was temporarily shut down, they offered debt relief to millions of people who borrowed money to go to college. They did all of this and more without raising taxes or having a prolonged battle over the usual question of how to pay for it.

For a while, it looked like the US and other countries were starting to break the mold on the old way of thinking about deficits and taxes. But now here we are just a handful of months after all of that bold action, and we’re sliding back into our old habits of thought. Can we build affordable housing and fix crumbling infrastructure? Can we expand Medicare to include dental, vision and hearing? Can we tackle our climate crisis? As Congress debates these questions, everyone is back to asking, how will you pay for it? It’s the wrong question.

In fact, the right questions don’t involve money at all. Instead of worrying about where the financing will come from, we should be asking, are these things worth doing? And do we have the real resources, the equipment, the raw materials and the technology to do them? Will they make society better off, and do we have the political will to act?

Katie:

So I will leave you with that for now. I’m going to try to get Stephanie Kelton on this show, I think. But in the meantime, that is all for this week. We will see you next week for a feedback Rich Girl Roundup.

Our show is a production of Morning Brew and is produced by Henah Velez and me, Katie Gatti Tassin, with audio engineering and sound design from Nick Torres. Devin Emery is President of Morning Brew content, and additional fact checking for this show comes from Scott Wilson.